MACRO MORNING NOTE APRIL 18, 2017
SPX Down, DXY Down, WTI Down
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
Global stock indices in all regions are declining this morning. In Asia, stocks are declining because of the iron ore rout, which has also forced copper to liquidated. In Europe, traders are focused on France’s upcoming election this weekend. Theresa May was quoted just hours ago of seeking an early election on June 8, 2017, which has led to surge in forex volatility of the Sterling. US reflation trade continues to spiral in a downward trajectory as Trump flips from his strong dollar and rate hike campaign promise to a weak dollar and ZLB. We believe the Trump Admin has thrown the Federal Reserve a curve ball, because following Trump’s initial plan of strong dollar and rate hikes would simply decline the economy placing adequate blame his Admin. Trump is now deflecting the blame and attempting to show in the next economic contraction how it will be the Federal Reserve’s fault. In the energy complex, WTI tags the lower 52 handle -93bps with supply concerns from US Shale lingering. API will report after-hours, expect this to be the next market generated information to drive the auction.
Overnight, Asia and Europe wanted nothing to do with the US reflation trade, SPX500, and WTI. This mentality of overseas traders usually serves as a warning for US cash session.
60 minute US reflation trade has formed a negative trajectory post March rate hike and Trump’s failed healthcare bill. Overall reflation trade is stalling.
30 minute US reflation trade is a downward trajectory. WTI starts to follow the trade lower. Exert caution in US Cash
Empire Fed MFG Index Starts to Stall
via Lawrence Fuller
Retail Sales Retail sales missed expectations in March, declining 0.2% for the month, while sales were unchanged when automobiles are excluded. What’s worse is that February’s gain of 0.1% was revised to a 0.3% decline, and sales have now been flat for two consecutive months when autos are excluded. This hard data shows how meaningless the surge in consumer confidence has been over the past few months. Consumers can’t spend confidence.
Inflation since 2000
The Trends in Headline and Core CPI
When NAHB Housing Market Index is >60 (Overbought) , plus a rate hike cycle, as seen throughout time it never ends well.
Full Market Cycles
72 month ROC
Global Financial Stress Elevated
Iron Ore remains in a bear market leading to stress in commodities along with China
In the commodity complex, energy Natgas and WTI are lower in the 7am hour. API will report after-hours. Copper -159bps following the continued crash in Iron Ore. Gold and Silver are off the highs but maintain their latest upwards impulse wave with weakness in the dollar. Soft Agri attempts to form a floor after deflationary trends persist from March. Bloomberg Commodity Index on a daily timeframe holds a slight premium verse the 200sma.
In forex, the most important move is the dollar demand weakening to the low 100 handle and risks blowing out the floor into the 99 level. GBP/USD V shape recovery from early EU cash now probing higher into the 1.26 handle. EUR/USD probes higher into the 1.06 midpoint.
Private Agri Weather Report
SPX500 monthly/weekly R2 2398 resistance with R1 2287 projection
UST10Y monthly/weekly R1 2.63 resistance with pivot 2.13 reversion
WTI monthly/weekly R1 55 rejection with pivot 44.81 projection
DXY monthly/weekly R1 103.74 resistance with pivot 99.26 support. This is a bracket waiting for major imbalance.